Urgently needed advice services must avoid Pension Wise flaws, says campaign group
The Low Incomes Tax Reform Group (LITRG) is calling on the financial and pension industries to urgently create two new financial advice services to help those with low incomes.
In response to the Government’s Public Financial Guidance consultation, LITRG has recommended that financial advisers should establish a charity that mirrors the services offered by the tax and debt charities. A similar service should be set up to give advice about pensions. Doing so would create a well-connected network of advisers able to give free professional advice on an individual basis to those unable to pay professional fees.
Crucially, LITRG recommends that the two new charitable enterprises, unlike some existing services such as Pension Wise, must be staffed by qualified financial advisers who would most likely be acting as volunteers. The new pension advice service recommended by LITRG would complement, rather than replace, the Government’s Pension Wise service1.
The two new services should have local branches to offer face-to-face meetings to people who cannot access telephone or online advice, and national helplines. LITRG also recommends that users of both new services should be offered independent, personal advice providing specific solutions that take account of their circumstances, such as their health, family commitments, assets, state benefits and their aspirations.
LITRG recommends that the services should be funded by the regulated financial industry, in the same way as the tax charities’ advice services are funded by the tax profession with contributions from government. They, along with the current tax and debt charities, could be overseen by a restructured Money Advice Service and the Financial Conduct Authority, to ensure it is regulated.
Anthony Thomas, Chairman of LITRG, said:
“We are delighted that the Government’s consultation shows it is thinking about new services. People getting by on low incomes should have the same kind of access to quality independent financial advice as anyone else, especially when it comes to pensions and savings. It is disappointing that tax was only mentioned once in the consultation given that it should form such an important part of any financial decision.
“A network comprising the new services suggested by LITRG, along with existing debt and tax charities, would allow individuals requiring tax advice to be referred to the specialist tax charities, or those requiring debt or financial advice to be referred to a relevant charity within the network.
“The current Pension Wise service is limited because it offers only general guidance which is given by staff who may not be qualified financial advisers. It is crucial that individuals who are unable to pay professional fees have access to advice that is based on their individual circumstances and is given by fully qualified professionals. We do not want a service such as Pension Wise where it seems people are reading from a script.
“Any new services should follow the existing tax charities model by providing a national helpline with face to face support in local areas. Some users may be digitally excluded and not have access to online materials and others may have disabilities, poor literacy and numeracy or have English as a second language that makes accessing a telephone service difficult. Locally-based services supported by a national helpline as part of a network of similar services, including tax advice, will ensure that those unable to pay for financial advice receive the help they need.”
Notes for editors
1. LITRG envisages that a new pension advice service would offer individual advice while Pension Wise continues to offer general advice
2. In September, The Financial Services Consumer Panel (FSCP) criticised the Government’s free guidance service Pension Wise, with concerns about the low numbers of people using Pension Wise. While the Pension Wise telephone service, delivered by the Pensions Advisory Service, requires its counsellors to have a minimum of five years relevant experience, Citizens’ Advice, which delivers the face-to-face service, requires no prior experience, expertise or any relevant qualifications. A Work and Pensions committee report also criticised Pension Wise, stating its website is ‘not fit for purpose’ and its guidance is ‘currently too narrow for too many consumers’. Out of around 200,000 who are known to have used the new pensions freedoms, just 10 per cent have taken up the offer of a Pension Wise appointment
3. LITRG’s response to the Government’s consultation can be viewed here
4. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 17,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
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